Papiese winning with high-volume, low-profile strategy

Richard Papiese's Midwest Thoroughbreds leads the nation in wins and is third in earnings. Papiese, who prefers to stay behind the scenes, is pictured below (third from left) in a rare winner's circle appearance at Canterbury Park.

Richard Papiese, mild blonde highlights in his hair, wears a black Harley-Davidson sweatshirt, slightly ragged at the cuffs, as he sits at his desk. Two boxers and three cats roam his work space, wandering through cubicles and into the simple room that serves as Papiese’s office. Sports memorabilia on one wall, a plaque on the floor leaning against another wall, describing, in Vince Lombardi’s words, “What it takes to be number one.” The offices sit in a small corner of a vast, half-million-square-foot building in University Park, Ill., a southern exurb of Chicago. Papiese’s family company, Midwest Store Fixtures, leases the entire warehouse-type edifice, where it manufactures, ships, and installs custom store fixtures for retail outlets such as those operated by AT&T. The building houses a woodworking division, a shipping department, an electronics zone, assembly lines.

One object, tucked into an area where metalworkers weld brackets, does not fit the scene: a starting gate. The gate has its companion pieces in Papiese’s office: a flat-screen television tuned to a racing channel, and a window on his desktop computer running a racing platform.

Having grown Midwest Store Fixtures into a $40 million-per-year business, Papiese has gone whole hog into horses. In two years he has doubled his number of starters while quadrupling his victories, and Papiese’s stable, Midwest Thoroughbreds Inc., will be the leading owner in the country by wins in 2010.

“I wouldn’t say I’m compulsive, but if I have a downside, it’s that I can’t stop growing,” said Papiese, 53.

With roughly 200 horses flying their banner as winter comes on, Midwest Thoroughbreds’ growth period might be close to finished. The question is whether Papiese, his furious dash to the top complete, can stay there. Recent history suggests the task is difficult. Louis O’Brien led the nation in wins with 221 in 2007 but got out of the sport entirely last April. Robert Cole Jr. won 234 races in 2008, but just 25 this year. Rick Englander racked up 279 wins in 2002 and notched a remarkable 405 in 2001. In 2010, he had no ownership stake in any North American starter.

“It’s a humbling business,” Englander said. “I made more mistakes in my 10 years of horse racing than 1,000 people make in a lifetime.”

Papiese (pronounced pa-PEACE), who runs his business and his stable with his wife, Karen, has made mistakes, too, but he has not yet been humbled.

“I watched what Englander did, what Maggi Moss did,” Papiese said. “I think there are different ways to get there.”

Englander said his stable turned a profit in 2001 and 2002, but then got overextended.

“At one point I had 18 trainers around the country,” he said. “It’s my passion, and I love it, but it got a little bit out of hand with running in all the jurisdictions.”

Richard Papiese? He has two trainers, and one of them, Jamie Ness, trains 90 percent of his stock. Papiese has raced all over the country, but his operation is far more consolidated than the far-flung Englander empire.

O’Brien, from the St. Louis area, apparently set a single-minded goal of seeing his name come first when year-end statistics were tabulated.
“He went from being the leading owner at Fairmount to wanting to be the leading owner at Hoosier, and then, when we kept winning, he wanted to be leading owner in the country,” said Ralph Martinez, who trained all the O’Brien horses. “He was second, second, second, he finally won it, and that was it. I think he thought there would be some kind of big parade, but he kind of realized, you win all those races, and what’s there? It lasts a couple of days – ‘I’m leading owner! I’m leading owner!’ – then it’s January 1, and someone else is trying to do it.”

Papiese definitely keeps score, but there is far more to his stable than the bottom-level claimers who fed the O’Brien operation. O’Brien collected castoffs from places like Woodbine; Papiese is far more diversified and substantive.

It also appears Papiese has been far less affected by negative economic conditions than many large-scale owners. Maggi Moss, leading owner of 2006 with 211 winners, had 92 horses a few years ago but now has 42.

“There’s a transition that racetracks are undergoing, purses being cut, races not going,” Moss said. “I’m always trying to progress six months ahead, and I’m not feeling the optimism in racing. I field a lot of calls as an attorney and a horse owner that deal with owners, trainers, non-payments, people wanting to sell. I’ve always been fortunate enough to sustain it and make money, but that’s getting harder and harder.”

Papiese the businessman has busted right through the economic downturn. Midwest Store Fixtures has consistently expanded revenues since 2003, and Papiese said he thinks he can take Midwest Thoroughbreds the same direction.

“I want to be the one to make money at this,” he said.

Papiese said he believes Midwest Thoroughbreds can use the same formula for profitable growth employed at Midwest Store Fixtures, where, Papiese said, “95 percent of the work we do we self-perform.”

That starting gate in his warehouse sits by the welders not for show, but because Papiese plans to have his people fix it up and send it back to the farm from whence it came. The farm? That’s a 137-acre facility in Anthony, Fla., that Papiese purchased in December 2009, along with 60-some acres of adjacent land. Papiese refurbished a dilapidated training track – three-quarters of a mile with a chute – and is in the process of building a new 40-stall barn to supplement existing barn space that already houses about 130 of his horses, most in active training. In the stabling area is an equine aquacizer, where horses circle in chest-deep water to gain fitness under minimal stress. When a battle-scarred claimer needs time off, Papiese doesn’t have to send him to someone else’s lay-up facility and pay for the horse’s stay: He’s got a place of his own ready to go and excellent facilities to bring that same horse close to race fitness before returning to the track. Papiese’s workers also have customized two full-sized horse trailers – piloted by Midwest’s drivers – large enough to ship 10 horses comfortably at once. Ness, Papiese’s primary trainer, has consulted with feed companies to create a customized program for Midwest horses. And Papiese said he has been “working with different farmers around the country” to self-supply with hay and straw.

“We have control here,” Papiese said. “That’s what we’re doing.”

Controlled, too, is Papiese’s public image within the racing scene: Essentially, he doesn’t have one yet. “No tape recorders, no cameras,” Papiese insisted when granting an interview at his business. Ness, who began training for Papiese almost three years ago, has seen his patron at the racetrack just once, at the Claiming Crown this summer at Canterbury Park.

Papiese, who employs 10 family members at his business, said long workdays get in the way of trips to the track.

“We’ve worked together 70 hours a week for 20 years,” he said.

Papiese grew up on the working-class East Side of Chicago, and financial wherewithal has not dried up his roots. His mother, Papiese said, was a “$3 trifecta bettor at the old Washington Park,” and Papiese claims horse racing “was something I always wanted to do.” He began doing it, as an owner, with two horses in 2001, first employing as a trainer Jerry Gryczewski, who was working part-time construction when Papiese hired him to train. Racing horses under his own name, Papiese won 39 races between 2003 and 2007; horses racing for Richard and Karen Papiese went 20 for 155 in 2007 and 64 for 512 in 2008. Papiese hired veteran horseman Hector Magana to train in 2006, but it was with the formation of Midwest Thoroughbreds and the hiring of Ness (another Midwest trainer, Brad Cox, was let go earlier this year) that the operation exploded. Midwest won 236 races in 2009, and so far this year has amassed 291 wins from 1,040 starters, a strikingly high 28 percent success rate. The stable is closing in on $4 million in 2010 earnings, second to mighty WinStar Farm LLC.

Papiese said his impulse toward ceaseless growth has found a companion in Ness, who first took a handful of lower-end Papiese horses at Tampa Bay Downs in January 2008.

At Hawthorne this fall, Ness bounces from shed row to shed row every morning, overseeing the training of close to 70 Midwest-owned horses under his care. Roger Brueggemann, also stabled at Hawthorne, has still more Midwest runners.

“I love it,” Ness said. “Give me more.”

At Papiese’s business, the head legal counsel dresses in jeans and a golf shirt. Ness fits right in. At Woodbine a couple of weeks ago, Ness had the first Grade 1 starter of his career.

“I had to buy a suit coat for that,” he said. “I’m always with the horse. I’m not one to be up in the grandstand. I come over with the horse, I go back with the horse.”

Ness, a one-time journalism student at South Dakota State University, worked in the Canterbury Park press box from 2001 to 2004, training on the side during those years before turning to full-time training in 2004. Since then, Ness has led a racetrack gypsy’s life.

“I think I’ve had nine different addresses in the last two years,” he said. “But that helps me. I’m flexible.”

Ness credits a hands-on approach and aptitude at the claim box for the awesome numbers he has annually produced since 2007. From 2001 to 2006, Ness won races at annual rates between 11 and 15 percent, but in 2007 his strike rate spiked to 29 percent and has stayed high ever since, topping out at 33 percent in 2009. In 2010, Ness has won 273 races, the second-highest total in the country, behind Steve Asmussen.

Ness said he is well aware that his success has spawned rumors of cheating.

Ness has accumulated fines for minor violations such as phenylbutazone overages, but the Association of Racing Commissioners’ International database shows that he has never been suspended for a medication violation. Earlier this year at Tampa Bay Downs, while Ness was away with his string at Presque Isle Downs in Pennsylvania, his barn was raided by agents from the Thoroughbred Racing Protective Bureau. A large syringe filled with Lasix was discovered in a storage box on a wall next to a desk in the barn office. “It was pretty cut and dried that someone had put it there,” Ness said. The case was remanded to the Tampa stewards, who fined Ness and closed the matter.

“I watched Ness for four years,” Papiese said. “I feel like he’s one of the best [trainers] in the country. I think he’ll do great things. He’s so grounded, I know we’ll be all right.”

Papiese and Ness, who speak eight or 10 times daily, scour past performances for potential claims. “We’ve found a sweet spot – I’m not going to say where it is – and if we stick to it, we’ll be all right,” Papiese said. There are fewer bottom-level claimers in the operation now, but Midwest’s turnover still has been mighty the last couple of years. Papiese dominated meets at Presque Isle and Tampa Bay in 2010, winning the owner’s crown at Presque Isle, 65-10, and at Tampa, 42-10. Papiese will be leading owner at the ongoing Hawthorne meet, as he was at Penn National and Thistledown. For now, almost all the runners are claimers; Midwest has never competed in a graded stakes race and has won four stakes overall.

“He’s doing what he wanted to do – win a lot of races,” said Louisiana-based trainer Alvin Sider, hired by Papiese in 2007 but let go earlier this year. “He had a game plan, and I think he’s found the right combination for him. He’s pretty involved with a lot of stuff, and he’s pretty sharp in the game, really. I’ve got to give him credit: He built his business, and that’s what he was doing with the horses.”

While Papiese has ascended through the claiming game, his operation has diversified in recent years. He has 16 broodmares and has raced a handful of homebreds, but he said he is getting out of the breeding business. Instead, Papiese began buying yearlings at auction and owns 52 youngsters who will turn 2 on Jan. 1. More than 30 of them are at the farm in Florida, training with Magana, whom Papiese moved to the farm from the track early this year.

“I wasn’t ready for that at first, but now that I’m here, I know I was ready to do something like this,” said Magana, 55, a former assistant to Bobby Frankel.

Each morning at 5:45, Magana begins sending seven-horse sets − some unraced maidens, others claiming horses on a Florida break − to the six-furlong training track. The last set of horses goes out sometime between 10:30 and 11. The horses out on the track have been prepped for track work by daily sessions in the aquacizer, which Magana credits for keeping horses sound.

“Every single horse that we train in the aquacizer, even those with a lot of problems, they made it to the races,” Magana said. “We train them for six weeks in the aquacizer, then we go to the racetrack. So far, only one out of maybe 80 didn’t make it. It’s not going to fix things, but it makes things easier. It builds a lot of muscle. “

“The idea is to make money for this guy so he can survive,” said Magana.

The stable has been edging ever closer to profitability, and while Midwest’s 2011 might look a lot like the stable’s 2010, younger non-claiming horses will steadily be added to the mix, and Midwest’s volume should lessen over the next couple of years, a potential boon to profitability.

“He wanted to be leading owner in the country, he’s going to do that this year, and now he’s got that out of his system,” Ness said.

Papiese has turned the presidency of the fixtures company over to his wife in order to focus on horses. Racing is no armchair hobby to him. It’s another arena to be mastered, brought under control using the tool Papiese appears to know best.

“If you’re honest and you work hard, he will respect you,” Magana said. “He works seven days a week. It’s why he’s been so successful: It’s all about work.”